Pensioners should suffer their share of the cuts

The Comprehensive Spending Review (CSR) was not particularly comprehensive. It will reduce spending as a proportion of national income to the levels we had in 2007 – hardly ambitious. By 2015, the state will still be spending 45% of national income (about 40% using the government’s preferred measure which overstates the national income denominator).

One reason why the CSR was relatively lame was because two areas were effectively excluded – the NHS and overseas aid. But another large interest group also escaped scrutiny: older people.

This may not be surprising. In both the 2005 and 2010 elections, the main parties were doing anything they could not to upset older voters – indeed the Conservatives’ 2005 manifesto went to extraordinary lengths in proposing distortions of the tax system to help old people. One of the problems when the government becomes the main provider of income to older people is that, as the electorate ages, it becomes more difficult to rein spending in – there is a vicious circle rather than self-correcting mechanisms at play. The median age of active voters (i.e. those who actually vote) is already over 50 and is rising rapidly. The young do not have much chance at the ballot box these days.

So, the CSR was pretty tough on the young – student grants will go; we will have the cliff-edge removal of child benefit for those earning around £40,000; and VAT and other taxes are increasing. Meanwhile, the sacred cows that most benefit the elderly – the NHS, benefits in cash and kind, and the basic state pension are either being protected or enhanced. Furthermore, benefits to pensioners are always increased to compensate for VAT increases whereas those who are working suffer reductions in real wages.